Schedule C, line by line, for a first-time filer

Schedule C is where a business that is just you reports what it took in and what it spent. It is attached to your personal return, it produces one number at the bottom, and that number drives both your income tax and your self-employment tax.

Who files one

You file a Schedule C if you carried on a trade or business as a sole proprietor. In practice that covers a lot of people who do not think of themselves as owning a business: a single-member LLC that has not elected to be taxed as a corporation, a rideshare or delivery driver, a freelancer, a tutor, a stylist renting a chair, someone selling on a marketplace with the intent of making a profit.

One Schedule C covers one business. Two genuinely different lines of work mean two Schedule Cs, each with its own income and its own expenses.

The header asks for the business name, address, a business activity code and your accounting method. It also asks whether you materially participated, and whether you made payments that required you to issue Forms 1099. Answer those honestly; they are there for a reason.

Part I: income

Part I starts with gross receipts. That is everything the business took in, from every source, not only the amounts that came with a form: 1099-NEC payments, 1099-K settlements, checks, cash, Zelle, tips.

Two cautions. Do not double count a payment that shows up on both a 1099-NEC and a 1099-K, which happens when a platform both hires you and settles the payment. And do not net expenses against income here; expenses have their own lines below, and reporting a net figure at the top makes the return disagree with what payers reported.

Returns and allowances come off next, then cost of goods sold if you carry inventory, which is figured in Part III at the back of the form.

Part II: the expense lines that matter

Part II lists the categories. Most sole proprietors use a handful of them.

• Car and truck. Either actual costs or the standard mileage rate, which for 2025 is 70 cents per mile. Either way you need a log with dates, miles and business purpose. Commuting from home to a regular workplace is not business mileage.
• Supplies, office expense, advertising. The ordinary running costs, deducted in the year paid on the cash method.
• Insurance other than health. Business liability and similar policies. Health insurance for yourself is a separate deduction on Schedule 1, not a Schedule C expense.
• Legal and professional services. Including what you pay to have the return prepared for the business.
• Contract labor. What you paid other people to do work, which is also what triggers your own obligation to issue 1099s.
• Deductible meals. Business meals are deductible at 50%, and only with a record of who was there and why. Entertainment is not deductible.

The home office

If part of your home is used regularly and exclusively for the business, it produces a deduction. The simplified method is the one to start with: $5 per square foot of the business-use area, capped at 300 square feet, so at most $1,500 for the year. It goes straight on the home-office line with no separate form.

"Exclusively" is the word that does the work. A spare room used only for the business qualifies; the kitchen table does not. The deduction is also limited by the profit of the business, so it cannot create or deepen a loss.

The alternative is the actual-expense method on Form 8829, which prorates rent or mortgage interest, utilities, insurance and repairs and adds depreciation. It is usually larger and always more work, and depreciation on a home you own has consequences when you sell.

Where the bottom line goes

Net profit from Schedule C flows two ways at once. It goes to Schedule 1 and into your total income, and it goes to Schedule SE, where self-employment tax is figured at 15.3% on most of it. Half of that self-employment tax then comes back as a deduction against income.

There is one more step in your favor. The qualified business income deduction takes 20% off qualifying business profit before tax is figured. When taxable income before the deduction is at or below $197,300, or $394,600 on a joint return, it is computed on the short Form 8995. Above those levels the longer form and its limits apply.

Recordkeeping